- There has been a rally in the number of smaller investors reducing their BTC holdings.
- Historically, this signals capitulation and is often followed by a price rally.
Bitcoins [BTC] The recent price drop below $40,000 has resulted in a significant drop in the number of wallets holding any amount of BTC. According to on-chain data provider Santiment, this decline is the fastest since the pre-bull run days of early October 2023.
📉👋 The amount of the total #Bitcoin portfolios have fallen at the fastest pace since early October (just before the big crisis). #crypto #bullcycle started). The public is showing a similar level of impatience this time, with more than 487,000 wallets containing 1 $BTC or pic.twitter.com/K6LwSWYUYM
— Santiment (@santimentfeed) January 26, 2024
More than 487,000 wallets holding 1 BTC or less have been liquidated over the past four days, signaling a wave of impatience and disappointment among smaller investors.
This cohort of BTC holders exited the market following the coin’s performance since ETF approval. Many had predicted a rally above $50,000 following the ETF’s approval.
However, the price of the coin did not witness any such rise, leaving many small traders scrambling to cut their losses.
According to data from CoinMarketCap.
Is BTC Nearing Its Bottom?
According to Santiment, this kind of decline in the assets of small BTC owners has historically been a sign of capitulation. This is usually followed by a price recovery. It often signals a price bottom, a phase characterized by renewed optimism that can help increase the value of the asset.
AMBCrypto reported rather that a capitulation event is required to end the current price decline. This will happen if a significant sell-off wipes out overloaded long positions and a subsequent drop in selling pressure.
This would result in a drop in the price of the coin and negative financing rates on all exchanges, which would provide a buying opportunity for many, which could lead to a price increase.
To determine if a price bottom has been reached, it is crucial to observe BTC’s Age Consumed metric. This metric tracks the movement of previously inactive BTCs.
When Age Consumed sees an increase, it suggests that a significant number of tokens that were once inactive have changed addresses. This signals a sudden and sharp shift in the behavior of long-term investors.
Conversely, when the Age Consumed metric drops, long-held coins remain in wallet addresses without being traded.
The benchmark is a good indicator of local tops and bottoms because long-term holders don’t move their dormant coins very often. Therefore, when this happens, it results in major shifts in market conditions.
According to data from SantimentThe last time BTC’s Age Consumed witnessed a significant increase was on January 16, when the coin traded at $43,154.
Read Bitcoin’s [BTC] Price forecast 2024-25
This has since been followed by a 7% decline, suggesting the possibility of this price point marking a local top.
To reach a bottom, there must be a sharp growth in BTC’s Age Consumed, followed by a rise in the value of the coin.
Source: Santiment